Central banks have been particularly vocal since the beginning of the year, either by expressing their skepticism or satisfaction with the easing of credit conditions and incoming economic data. For some countries, this has changed rate hike expectations, for others it simply confirms existing views. As you may know, central bank rate hike expectations change often but here’s the latest. Find out which central banks are expected to keep monetary policy unchanged in the coming year and which ones are expected to ease below!
Federal Reserve - No Changes in 2012 (surprise, surprise)
European Central Bank - No more Rate Cuts in 2012 - upgrade from the pricing in of 25bp of easing in Jan
Bank of England - No Changes in 2012
Bank of Canada - No Changes in 2012
Reserve Bank of Australia - Mkt was pricing in 75bp of easing this yr back in Jan, now only 50bp expected
Both the Bank of England and the European Central Bank will be making monetary policy announcements on Thursday. The market expects the ECB to remain on hold and BoE to increase their asset purchase program by GBP 50 billion. A quick look at the following tables explain why the BoE is expected to ease and the ECB is not. Since the last monetary policy meeting, Eurozone economic data was neutral / mixed to bullish. U.K. data on the other hand was neutral / mixed to bearish.
This morning, central banks around the world released their latest reports on foreign exchange turnover. These numbers are for October 2011. FX trading volume declined in every part of the world except for the U.S., where it rose to a fresh record high in October. The anomaly in the U.S. may have to do with the improvement in risk appetite in October - stocks rose strongly, which could have made US investors more willing to take on risk. In other parts of the world, trading volumes in the Swiss Franc and Japanese Yen could have suffered from central bank intervention, which capped volatility in those pairs.
London Link to Report
- Average daily reported UK foreign exchange turnover was $1,972 billion in April 2011, 3% lower than in October 2010, and 17% higher than a year earlier. This was off the highest level of turnover recorded since the survey began in April.
- The decrease in turnover was driven by a 9% fall in FX swaps activity. Spot turnover rose
2% to a record survey higher.
New York Link to Report
- Daily FX market turnover rose to a record $977 billion for the Oct 2011 reporting period, up 20% from prior year
- On an average daily basis, total turnover declined by 14.4% from US$ 61.2 billion in April 2011
to US$ 52.4 billion in October. This was the first decline in traditional foreign exchange
turnover since April 2009
- Total average daily turnover in all OTC foreign exchange instruments in the Australian market was US$167.9 billion in October 2011. This was a decline of 23 per cent from April 2011, and a decline of 14 per cent over the year.
- Average daily turnover in traditional OTC foreign exchange instruments (spot, outright forwards and foreign exchange swaps) in the Australian market was US$161.2 billion in October 2011. This was a decline of 23 per cent from April 2011, and a decline of 14 per cent over the year.
Forex (and Futures) trading involves high risks, with the potential for substantial losses, and is not suitable for all persons.
Kathy Lien is employed as Co-Head of Global Research for Global Forex Trading, a division of Global Futures & Forex, Ltd. (GFT). However, the KathyLien.com web site is maintained by Kathy Lien personally, and is separate and independent from her employment with GFT. GFT is not affiliated with and does not control the content of the KathyLien.com web site, and opinions expressed by Kathy on the KathyLien.com web site are not necessarily the opinions of GFT
February 16, 2012 
Posted in Bank of Canada, Bank of England, Bank of Japan, Reserve Bank of Australia, central bank rate hike expectations, rbnz rate decision, reserve bank of australia intervention, reserve bank of new zealand 
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